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The roller coaster economy – 2Q GDP up four percent

The roller coaster economy, dramatically down first of the year, bounced up to a four percent annual growth rate in the second quarter.

Real gross domestic product — the output of goods and services produced by labor and property
located in the United States — increased at an annual rate of 4.0 percent in the second quarter of 2014,
according to the “advance” estimate released by the Bureau of Economic Analysis. In the first quarter,
real GDP decreased 2.1 percent (revised).

The Bureau emphasized that the second-quarter advance estimate released today is based on
source data that are incomplete or subject to further revision by the source agency (see the box on page 3
and “Comparisons of Revisions to GDP” on page 10). The “second” estimate for the second quarter,
based on more complete data, will be released on August 28, 2014.

The increase in real GDP in the second quarter primarily reflected positive contributions from
personal consumption expenditures (PCE), private inventory investment, exports, nonresidential fixed
investment, state and local government spending, and residential fixed investment. Imports, which are a
subtraction in the calculation of GDP, increased.

Real GDP increased 4.0 percent in the second quarter, after decreasing 2.1 percent in the first.
This upturn in the percent change in real GDP primarily reflected upturns in private inventory
investment and in exports, an acceleration in PCE, an upturn in state and local government spending, an
acceleration in nonresidential fixed investment, and an upturn in residential fixed investment that were
partly offset by an acceleration in imports.

The price index for gross domestic purchases, which measures prices paid by U.S. residents,
increased 1.9 percent in the second quarter, compared with an increase of 1.4 percent in the first.
Excluding food and energy prices, the price index for gross domestic purchases increased 1.7 percent,
compared with an increase of 1.3 percent.

Real personal consumption expenditures increased 2.5 percent in the second quarter, compared
with an increase of 1.2 percent in the first. Durable goods increased 14.0 percent, compared with an
increase of 3.2 percent. Nondurable goods increased 2.5 percent; it was unchanged in the first quarter.
Services increased 0.7 percent in the second quarter, compared with an increase of 1.3 percent in the
first.

Real nonresidential fixed investment increased 5.5 percent in the second quarter, compared with
an increase of 1.6 percent in the first. Investment in nonresidential structures increased 5.3 percent,
compared with an increase of 2.9 percent. Investment in equipment increased 7.0 percent, in contrast to
a decrease of 1.0 percent. Investment in intellectual property products increased 3.5 percent, compared
with an increase of 4.6 percent. Real residential fixed investment increased 7.5 percent, in contrast to a
decrease of 5.3 percent.

Real exports of goods and services increased 9.5 percent in the second quarter, in contrast to a
decrease of 9.2 percent in the first. Real imports of goods and services increased 11.7 percent,
compared with an increase of 2.2 percent.

Real federal government consumption expenditures and gross investment decreased 0.8 percent
in the second quarter, compared with a decrease of 0.1 percent in the first. National defense increased
1.1 percent, in contrast to a decrease of 4.0 percent. Nondefense decreased 3.7 percent, in contrast to an
increase of 6.6 percent. Real state and local government consumption expenditures and gross
investment increased 3.1 percent, in contrast to a decrease of 1.3 percent.

The change in real private inventories added 1.66 percentage points to the second-quarter change
in real GDP after subtracting 1.16 percentage points from the first-quarter change. Private businesses
increased inventories $93.4 billion in the second quarter, following increases of $35.2 billion in the first
quarter and $81.8 billion in the fourth quarter of 2013.

Real final sales of domestic product — GDP less change in private inventories — increased 2.3
percent in the second quarter, in contrast to a decrease of 1.0 percent in the first.